Two-Way Risk Spillover of Financial and Real Sectors in the Presence of Major Public Emergencies

Yong Li, Ziyi Zhang and Tong Niu ()
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Yong Li: School of Economics and Management, Tongji University, Shanghai 200092, China
Ziyi Zhang: School of Economics and Management, Tongji University, Shanghai 200092, China
Tong Niu: School of Economics and Management, Tongji University, Shanghai 200092, China

Sustainability, 2022, vol. 14, issue 19, 1-20

Abstract: In order to study the two-way risk spillovers between financial and real industries under major public emergencies in the Chinese market from 2007 to 2020, the sample period of major emergencies was determined based on the value at risk (VaR) time series, and it was found that the impact of major emergencies would lead to the rise of systemic risks in the financial industry. Secondly, the real sectors are taken as the main research object to measure the value of systemic risk spillover by using DCC-GARCH, and it shows that the industry with significantly systemic vulnerability from the overall financial risk spillover is the real estate industry, material industry, and energy industry. The results of subdividing financial sectors show that the banking sector has the most significant contribution to financial risk spillover in the real sectors. At the same time, identify the systemically important industries with high spillover risk to the financial industry, namely, utilities, consumer discretionary and industrials. Among the financial sub-industries, the risk spillover to the securities industry from the real sectors is the most significant. Finally, it was found that the system vulnerability and importance characteristics of the real entity industry depend on the nature of events and have certain rules.

Keywords: systemic financial risk; major public emergencies; conditional value at risk; DCC-GARCH (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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